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CNI: Coal Takes a Toll on Total Railcar Units

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Canadian National Railway’s total railcar units

Canadian National Railway (CNI) reported a ~20% fall in total railcar units in the week ended March 26, 2016. The company hauled nearly 55,000 railcar units in the same week compared to ~69,000 units in the week ended March 28, 2015.

This time, even railcar units excluding coal and coke fell by 16.7%. Note that CNI received 18% revenues each from US and Canadian domestic traffic in 2015. The fall in CNI’s total railcar units for the week ended March 26, 2016, was in sync with the fall in the total US and Canadian railcar units.

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Is coal important for Canadian National?

Canadian National’s coal including coke carloads fell by almost 40% in the week ended March 26, 2016. CNI moved ~6,000 railcars of coal and petroleum coke in the same week, compared to 10,000 units in the same week in 2015. Note that only 5% of CNI’s total revenues in 2015 came from coal transportation. In addition, coal’s contribution to the company’s total carloads was a mere 8% in 2015.

To sum it up, CNI is well positioned to avert coal headwinds compared to its rival Canadian Pacific (CP) and US peers such as Norfolk Southern (NSC), CSX (CSX), Union Pacific (UNP), Genesee & Wyoming, and Kansas City Southern.

All US-born Class I railroads make up the portfolio holdings of the WisdomTree Earnings 500 ETF (EPS).

The frontrunners and the laggards

Only one commodity group, food and kindred products, rose in the week ended March 26, 2016. This means the remaining 19 commodity groups, most notably automobiles and grain, were in the red.

In the next part, we’ll analyze the intermodal traffic of Canadian National Railway.

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